TY - JOUR
AU - Fullerton, Don
TI - Tax Policy Toward Art Museums
JF - National Bureau of Economic Research Working Paper Series
VL - No. 3379
PY - 1990
Y2 - June 1990
DO - 10.3386/w3379
UR - http://www.nber.org/papers/w3379
L1 - http://www.nber.org/papers/w3379.pdf
N1 - Author contact info:
Don Fullerton
Department of Finance
University of Illinois
515 East Gregory Drive, BIF Box#30 (MC520)
Champaign, IL 61820
Tel: 217/244-3621
Fax: 217/244-3102
E-Mail: dfullert@illinois.edu
M1 - published as Don Fullerton. "Tax Policy Toward Art Museums," in Martin Feldstein, editor, "The Economics of Art Museums" University of Chicago Press (1991)
AB - Although art museums do not pay any substantial taxes, they are greatly affected by various U.S. tax rules. The individual receives a deduction for donations of art to museums, the estate gets a deduction for bequests, and the corporation gets a deduction for charitable gifts. Art museums also are not taxed on investment income or on some "related" business activities. This paper reviews the logic for these rules and discusses their economic effects. In combination, this set of tax provisions is found to have a tax expenditure that is larger than direct federal expenditures on art museums in the U.S. The amount of this tax expenditure or implicit subsidy has been falling in recent years because of reductions in the marginal personal income tax rates at which individuals deduct gifts. High income taxpayers are found to be the most responsive to marginal tax rates, and they also tend to give the largest amounts to the arts. Therefore the level of the top personal marginal tax rate is particularly important to art museums. Simulations here suggest that the personal marginal rate reduction in the Tax Reform Act of 1986 could reduce gifts to the arts by as much as 24 percent.
ER -